Wednesday, 30 March 2011

AB-Inbev *hearts* Goose Island. So now what do we do?

I know I'm probably the last beer blogger on earth to weigh in with a comment on the news that AB-Inbev has bought Goose Island, but comment I must - even if I repeat what everyone else has said.

At the outset it looks tricky: I've criticised AB-Inbev more than any other macro, not out of any prejudice, but simply in response to their actions. And Goose Island is one of my favourite brewers in the world, with their IPA my standard issue secret weapon for converting people who 'don't like' beer.

AB-Inbev do not like beer. Most people I have met personally who work for the corporation don't even drink it. I have argued with AB-Inbev marketers, trying to convince them that, if you want to make money from selling beer, you must recognise that it is not like other grocery products - that it has more romance, charm and mystery around it, that people take a greater degree of ownership in beer brands than they do in other product sectors. And those marketers have disagreed with me, stating categorically that they feel beer is no different from any other product and can be standardised and treated exactly the same. Stuart Macfarlane, CEO of AB-Inbev UK, has said that he works not for a brewer, but for an FMCG marketing company that happens to sell beer. It's a company that has an industry-wide reputation for being a ruthless cost cutter - after all, their relentless expansion has to be paid for somehow. The tragedy of Stella Artois is that it was once a special beer, and the last ten years have seen every single ounce of value stripped from that beer. AB-Inbev is also a company where, if you are an employee and you are seen drinking a beer from a different brewer - even on your own time, off the clock, when the company is not paying you - this can be, in the words of more than one former employee, "a career ending move." (Apart from anything else that completely transgresses employer-employee relationships, making working for AB-Inbev a form of indentured slavery, and I look forward to the day when some ex-employee sues their asses over this disgraceful policy. And if what I am saying is not true, I invite AB-Inbev to sue me for libel. I'm not short on potential defence witnesses.)

So no - I don't think it's good news that a mean, ruthless, cost focussed, heartless, acquisitive, jealous company run by people who don't even like beer has bought one of the best craft brewers in the world.

But this is not because "they're a macro" - it's because of the specific organisational policies and practices I've outlined. Interbrew in the old days were not like this. Not all AB-Inbev's competitors are like this. My point is, it's not about how big they are, it's about what they do - it's about their record.

I can only hope that people on Twitter who talked about their Goose Island beer 'turning from a micro to a macro' when they were half way down a pint were joking. As many people have pointed out, AB have long had a stake in Goose Island - they've just upped the size of that stake into a controlling interest. If your problem with this is the mere association, the smell of a macro brewer, then - actually, you know what? You just stick with that. I'm not going to try to convince you otherwise. But I don't think you'll end up a happier drinker because of it. The Goose Island products that are currently sitting in your beer fridge, in your local craft beer pub, your supermarket or beer shop, are no different than they were a week ago.

This takeover occurred, weirdly, just two days after I finished a piece for Brewers Guardian on innovation and new product development. In that piece, I argued that the brand management culture of big companies is entirely different from the entrepreneurial spirit of smaller companies. One can manage and grow brands on a global scale, but is incapable of nurturing genuinely new ideas to market. The other is the opposite. If a big company really wants something fresh and new, the best way for them to get it is to buy it, once it's reached a point where it has proven to be a profitable and sustainable niche product that is ready to make the transition to something bigger. And if a small company wants to grow beyond that point, the best thing they can do is to sell to a company that has processes, channels and people in place who know how to do that.

I think it's a perfectly valid argument for a craft beer fan to say, "Yeah, but we don't want them to grow! We want them to stay small and crafty." It's your opinion - beers are built by fans and fans have a say, and God knows, I'm all for supporting small companies because they are not multinationals. But remember, when a big company buys a small company in this way, the small company also wants to sell. If the people who built this thing from scratch, who devoted 20 years of their lives to it, decide this is the next step in the evolution of the business, you have to respect that.

So where does all that theory leave this particular acquisition? I'm in total agreement with Nigel Stevenson of James Clay, the importers of Goose Island into the UK. He says,

"Anheuser-Busch has acquired an American brewer of high acclaim, we thereby feel they recognise the potential within this market and appreciate that genuine craft beer brands cannot be 'invented' by a large Multinational organisation.

"At James Clay we are immensely proud to have been involved in Goose Island's growth and development over the years. We urge Anheuser-Busch to respect the culture of experimentation and innovation that has made Goose Island the world renowned brewer it is today. James Clay will continue to work with Goose Island in the UK but will monitor the impact of Anheuser-Busch closely.”

To illustrate what this could mean: I'm currently consulting with another global macro brewer who is doing a deal not dissimilar to this (though on nothing like the same scale). It's not something I will cover as a writer because that would be a conflict of interest, and I can't say who it is until it goes public later in the year. But the macro in question is saying to itself internally, "We can't manage brands like this the way we normally do - if we apply our standard processes to the craft market, we'll only fuck it up." The deal therefore gives the craft beer access to far greater distribution channels and new investment in the brewery, and gives the macro a slice of the profit plus a little kudos, and the chance to see how craft beer works. But the macro has committed to not trying to interfere with how the micro makes its beer.

Similar deals occurred in Canada a few years ago, when Molson Coors acquired craft brewers Creemore Springs and Granville Island. These beers now have far greater distribution, but so far their craft brewing values and ways of doing things have not been compromised by pressure from the macro.

Will AB-Inbev follow a similarly enlightened process? Who knows? It would be nice if they told us - the only comment so far, unless I've missed something, is from the Goose Island guys. On the one hand, their record makes me very pessimistic. On the other, despite recent evidence to the contrary, they can't actually be total morons. If they wanted to make Craft Beer Lite, they could do so without forking out $39m for Goose Island. One can only hope they've bought it for the right reasons - that they recognise the value of craft beer, concede that they cannot do it themselves, and have a deal in place that will allow the craft brewer to continue doing that they do best, but on a larger scale.

I wouldn't bet money on this, but I have my fingers crossed. Either way, I'll be waiting until they completely screw it up before I start attacking them for having done so.

21 comments:

neiljgower
said...

Is it a similar situation to an obscure band we follow achieving mainstream success? Even if their artistic integrity isn't compromised, they're no longer our secret and maybe, just maybe, no longer a means of displaying our superior, esoteric knowledge. Can't fight my gut reaction, however, which is emphatically 'Oh no...'

Someone said on the day this was announced...I might be right or wrong, but just remember beer people big industrial breweries never make craft breweries, they just buy them...Never was a truer word spoken.

I love Goose Island IPA, one of my absolute favourites. I also enjoy their Christmas beer and their Winter ale. But then I used to enjoy Pilsner Urquell - a lot. Since it went Macro and the lagering process was tampered with it doesn't taste nearly as good. I'd hate to lose another classic because of cost cutting, but I can see it coming sadly.

I had a fascinating conversation with someone who works on the HR side of global AB-InBev a couple of days ago (not in the UK) who had total contempt for the company's treatment of its employees since it had acquired the brewer he originally worked for. So good luck Goose Island workers - you'll need it.

This is all part of the paradox that the larger a company becomes, the more it tends to concentrate on enhancing shareholder value in the short term (ie cutting costs, increasing dividends, driving up the share price), at the expence of shareholder value in the long term (ie building sustainable returns that will last throughout the next inevitable downturn). But that's a subject for another book …

Good of you to mention James Clay, they are fantastic guys. I emailed them a while ago about where Brooklyn Lager would be available on tap (after they landed the keg import deal) in and around leeds and they not only replied straight away but sent me a clickable google map with all the locations highlighted! Incidently we're spoilt for choice round here because of james clay being based nearby. A truly excellent importer and distributer.

I'm with you about AB-InBev aswell, I'd be massively surprised if they don't cock it up. The problem is that as you mention it may happen over such a long period of time that it isnt noticeable in the short term. And in ten years time when we're all muttering 'it doesnt taste like it used to' the new drinkers of the day will try to fob us off with claims of rose tinted glasses and misplaced nostalgia.

It's important to remember that giant organizations such as AB-InBev rarely change quickly. The patter by which Goose Island will be treated has already been set. The absolutely unproductive drive tocsatisfy short-term needs, as Martyn notes, will dominate. Strategically, they cannot operate any way.

Hearty Goodfellow - if that is what they do with it, then I agree with you 100%. I just can't believe they'd the quite that stupid.

Probably a more relevant comparison would be what they did with Hoegaarden and Leffe - still not bad compared to mainstream, especially Hoegaarden, but not a shadow of what they were, nor what their competitors still are.

BUt as I said, I think ABI would be monumentally stupid to do even that with GI -there's just no rationale, apart from short term cost cutting - oh.

Thanks for a very lucid and well considered commentary...quite refreshing compared to some of the things I've read in the last few days. Much of the vitriol expressed elsewhere has been the result of jumping to conclusions (although given the big company's track record, it is a very short jump). In any event, I'm glad you pointed out that 'big' doesn't necessarily automatically have to mean 'bad'. One can only hope that by some miracle of lucid thinking, AB-InBev does actually manage to grow the brands without 'screwing the Goose', as it were. It would indeed be a real shame to see these really fine products dumbed down. Lets just sit tight for a bit and hope that AB-InBev surprises everyone and does the right thing with their new acquisition. If they do, this will be a good thing for "craft" beer, not a bad thing.

Martyn: Many of the Belgian beer enthusiasts I know love to blame the Brazilians for what's become of InBev, forgetting how much they despised Interbrew when it was around. It was a monster then, I suppose, but at least it was their monster. Also I'm from Missouri, where A-B was a monster but at least it was our monster. So I'm sympathetic with your source.

But what I read from the States is a lot of folks treating A-B Inbev as if it is still their monster. Oh, look, the makers of Wild Blue Blueberry Lager finally wised up and decided that craft beer is worth something! But this is a different monster entirely. While we're all reserving judgement, count me among the most cynical.

For me, the 3rd paragraph of "Ken's" comment to Andy Crouch's post on the buyout is most insightful. I direct your attention to: http://www.beerscribe.com/2011/03/28/why-the-ab-inbev-deal-is-good-for-craft-beer/comment-page-1/#comment-1970

Creemore beer did not change after Molson Coors acquired it, there was even some innovation, e.g., the release of the Keller Beer version. It may be that macros now realize that they should maintain quality after buying small breweries.

On the other hand: there are so many brewers now in the U.S., Canada and U.K., and so much product diversity, that numerous options continue to exist for craft beer fans. True, it may be necessary to look harder for it in some areas, or drink more bottled vs. draft, but still there are many choices in Chicago and almost everywhere now (or areas accessible to same).

Just as an example, good as the Goose Island IPA is, numerous pale ales in the U.S. style are now available in the U.K. (Jaipur is top class). And other imports are available, bottled Sierra Nevada Pale Ale can be found in many pubs in London and even in draft form, I drank some in perfect condition not long ago at Southwark Arms at Borough Market.

There are always alternatives.

By the way I know there are different views on this but I think Urquell is still a remarkable beer. SAB Miller does a great job keeping that flag flying in my opinion.